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Big Premium Hikes Fuel Obamacare Debate

THE DAILY GAZETTE, Schenectady, NY

WASHINGTON -- Urging people to sign up for coverage under the Affordable Care Act, President Barack Obama said last week that while premiums might be rising, most consumers need not worry. "Premiums going up," he said, "don't necessarily translate into higher premiums for people who are getting tax credits."

Federal subsidies will generally grow with premiums, the administration says, even as rates soar 25 percent to 50 percent or more in some markets. "Most people are going to be pleasantly surprised at just how affordable their options are," the president said.

But left unmentioned in the pitch to consumers are what economists and health policy experts describe as possible reasons to be concerned about rising premiums:

* Higher subsidies mean higher costs for taxpayers.
* Many people buying insurance on their own do not receive subsidies. And for many others, the subsidies are small.
* Premium increases indicate the magnitude of cost increases for insurers. The continued increases in these costs help explain why the marketplace has been unstable and some insurers have pulled out.

"You should be concerned anytime prices go up rapidly," said Robert D. Reischauer, a former director of the Congressional Budget Office. "This is increasing costs to the government."

Moreover, federal officials say, publicity about rising sticker prices may discourage some people from seeking coverage in the marketplace, whose annual open enrollment period begins Tuesday. Research by the government and insurers suggests that many of the uninsured are unaware of the subsidies they may be able to obtain through the marketplace.

The Congressional Budget Office estimates that federal spending on premium subsidies will total $43 billion in the current fiscal year and $672 billion over the coming decade -- costs that could increase if premiums and subsidies continue to rise. Still, the subsidy costs are much less than the budget office originally predicted because enrollment is much lower and health costs have grown more slowly.

In his remarks last week on the Affordable Care Act, made in a conference call with thousands of supporters and health insurance counselors, Obama said that, after taking account of subsidies, "more than 7 in 10 consumers will be able to find a plan for less than $75 a month."

But 15 percent of the 10 million people with marketplace coverage under the 2010 health law do not receive subsidies, mainly because their incomes are too high. And the administration estimates that 6.9 million people buy insurance on their own outside the marketplace, so they cannot obtain subsidies, which are available only through the exchanges. One-third of them might qualify for tax credits if they bought insurance through the exchange, federal officials said.

Emily Odza, a part-time librarian in Oakland, California, said the monthly premium for her Kaiser Permanente plan was rising next year to $900, from $800. Subsidies cover about half of the cost. She recently took a second part-time job.

"I worry most about the fact my income may rise slightly above the cutoff point," Odza said. "If you want to earn as much as you can just to survive, the government takes away the subsidy." Financial aid becomes unavailable when an individual has income of more than $47,520 a year.

The Obama administration says people can usually avoid a big increase in premiums if they shop around. Odza called that advice "totally maddening."

"It took me several years to settle down with my doctors at Kaiser," she said. "They expect me to switch every year to find the best price?"

Angela Gehm, a retired school administrator in Long Beach, Indiana, said the increase in her premiums for 2017 outstripped the expected increase in her subsidy. Gehm said she recently received a notice from her insurer, Anthem Blue Cross and Blue Shield, saying that the premium for her midlevel "silver" plan would rise to $1,007 a month next year, from $827 this year. The subsidy, $583 a month, will be the same, she said, so her cost will rise 74 percent, to $424 a month, from $244.

It was not immediately clear how her subsidy was calculated, but the subsidy is based on the cost of a reference, or benchmark, plan.

Gehm said she remained a staunch supporter of the Affordable Care Act. She said her views of the 2010 health law were informed by personal experience. She was treated for breast cancer in 2011-12 and benefited from a special insurance program created by the law for people with pre-existing conditions.

Two years before the law was enacted, she recalled, she sought insurance for herself and her son. He had Type 1 diabetes, she said, and the insurance company "said flat-out, 'That's an automatic denial.'" The law now forbids such discrimination.

George C. Halvorson, a former chief executive of the Kaiser Permanente health plan, said the rate increases were a reflection of the problems insurers faced. The premium, he said, reflects the average cost of care for an insured population. "Every insurance company in the exchange has to figure out how to bring down that cost," he said. "They can manage care better, pay less for each service or bring in a healthier population."

Dr. David T. Feinberg, the president and chief executive of the Geisinger Health System, in Pennsylvania, said, "We are going through bumpy waters, but I think the market is stabilizing." The Pennsylvania insurance commissioner has just approved rate increases averaging slightly more than 40 percent for Geisinger's health plan in 2017.

State insurance regulators have reviewed and approved most of the big rate increases taking effect in January. Insurers submitted data showing that they had lost tens of millions of dollars in the exchanges because customers were sicker than expected and, in some cases, dropped their coverage after receiving expensive care.

Many Democrats, including Obama and Hillary Clinton, who hopes to succeed him as president, want to increase subsidies to protect consumers against further increases in insurance costs. But some Democrats say that is not enough.

"Subsidies and more taxpayer dollars are not the only answer," said  Jamie Court, the president of Consumer Watchdog, a liberal advocacy group. "Insurance companies that get more subsidies will just keep asking for more subsidies, without controlling costs."